International Business Machines Corp., Armonk, N.Y., purchased group annuity contracts from Prudential Insurance Co. of America and Metropolitan Life Insurance Co. to transfer a total of $16 billion in U.S. defined benefit plan liabilities.
It is the largest U.S. pension plan buyout transaction in a decade and the second largest in U.S. history.
The purchases of the contracts, which closed Tuesday, transfers the benefit-paying responsibility for about 100,000 retirees and beneficiaries covered by the IBM Personal Pension Plan, according to an 8-K filing with the SEC.
Each insurer will have an irrevocable commitment to pay 50% of the pension benefits for each transferred participant that are due on and after Jan. 1, 2023. Prudential will be the lead administrator. According to the filing, the pension buyout affects liabilities “related to certain pension benefits that began to be paid prior to 2016.”
State Street Global Advisors acted as the independent fiduciary for the transaction, which was paid directly by assets from the plan.
It is the largest such transaction since General Motors Co., Detroit, announced in 2012 its plan to transfer $29 billion to Prudential via a pension buyout transaction.
Once the liabilities are transferred to Prudential and MetLife, IBM’s U.S. defined benefit plan liabilities will be cut by a third.
As of Dec. 31, IBM’s U.S. defined benefit plan assets totaled $51.85 billion, while projected benefit obligations totaled $48.18 billion, for a funding ratio of 107.6%, according to its most recent 10-K filing.
IBM officials could not be immediately reached for further information.
